Bailout talks break down

WASHINGTON - A Republican rebellion stalled government efforts Thursday to avoid economic meltdown, a chaotic turnaround that disrupted the choreography of an extraordinary White House meeting meant to show joint resolve from the president, the political parties and the presidential candidates.

After six days of intensive talks on the $700 billion financial industry bailout proposed by the Bush administration, with Wall Street tottering and presidential politics intruding six weeks before the election, there was more confusion than clarity.

An apparent breakthrough was announced with fanfare at midday by key members of Congress from both parties — but not top leaders. Wall Street cautiously showed its pleasure, with the Dow Jones industrials closing 196 points higher.

But the good news and the market close were followed by a rash of less-positive developments.

Washington Mutual Inc. was seized by the Federal Deposit Insurance Corp. in the largest failure ever of a U.S. bank, after which JPMorgan Chase & Co. Inc. came to its rescue by buying the thrift's banking assets.

And a late-afternoon White House summit bringing together President George W. Bush, presidential contenders John McCain and Barack Obama, and top congressional leaders, described as "a full-throated discussion" by one person in the room and "a contentious shouting match" by McCain's campaign, broke up with conflicts in plain view.

Conservatives were in revolt over the astonishing price tag of the proposal and the hand of government that it would place on private markets.

Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House meeting to say the announced agreement "is obviously no agreement." McCain's campaign issued a statement saying, "the plan that has been put forth by the administration does not enjoy the confidence of the American people as it will not protect the taxpayers and will sacrifice Main Street in favor of Wall Street." The White House, too, acknowledged there was no deal, only progress.

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Meanwhile a group of House Republican lawmakers circulated an alternative that would put much less focus on a government takeover of failing institutions' sour assets. This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the U.S. purchase the assets.

Inside the White House session, House Republican leader John Boehner announced his concerns about the emerging plan and asked that the conservatives' alternative be considered, said people from both parties who were briefed on the exchange. They spoke on condition of anonymity because the session was private.